Bugatti GmbH v Shine Forever Men Pty Ltd (No 2) [2014] FCA 171

Last October, Tracey J found that Shine Forever had infringed Bugatti’s registered trade mark (for BUGATTI) by selling clothing and accessories under the trade mark BUGATCHI and BUGATCHI UOMO. Now Tracey J has ordered that Shine Forever pay Bugatti $551,159.39 plus costs on an indemnity basis.

Apart from the magnitude of the amount, the decision illustrates the onus the court places on an infringer, once found to infringe, and the latitude afforded a trade mark owner confronted by a recalcitrant infringer.

In addition to an injunction to stop the infringing conduct, like most intellectual property statutes, the relief one can get for infringement of a registered trade mark includes damages or, at the trade mark owner’s option, an account of profits.[1]

To assist Bugatti in choosing between these two options, Shine Forever was ordered to provide an affidavit deposing to how many goods it had sold bearing the infringing trade mark, the price(s) they were sold for, the costs incurred in acquiring and selling the goods and the estimated profit it made.

Shine Forever was dilatory in complying with this order and there were serious doubts about the genuineness of its compliance. For example, it was claimed in Shine Forever’s “election” affidavit that the total sales were $198,407.39 worth of goods “through the BUGATCHI UOMO branded store” while total outgoings were $157,680 so that, after adjustments, there had in effect been no profit. However, in the course of the liability proceedings, Shine Forever had filed a profit and loss statement for the first 8 months of the infringing period showing total sales of $370,440.10. This profit and loss statement had been audited and certified by Shine Forever’s external accountants.

Shine Forever did not seek to explain the disparity between these two sets of figures. In fact, it failed to turn up to the hearing for the account at all.

Bugatti pointed out that the audited figures for only 8 months of the 24 month period of infringement far exceeded the amount admitted for the whole period in the “election” affidavit. The audited figures showed sales of $46,000 per month. If it were assumed that Shine Forever continued to make sales of $46,000 per month for the whole infringing period, total sales would have been $1,129,440.10. Bugatti then applied a series of assumptions and discounts, including using the costs estimated in the “election” affidavit (not the certified profit and loss statement) to arrive at the figure $551,159.39.

Tracey J recognised that Bugatti’s approach was far from ideal, but was prepared to adopt it as the best available course given the limited and imperfect information available – information which only Shine Forever could supply and which it had manifestly failed to do:

20 This process of calculation is far from ideal. It is beset by many difficulties. These include the need to make assumptions because business records which should have been produced by Shine Forever, pursuant to Court order, were not provided. Of particular concern is that …. This concern is alleviated, to some extent, by the applicant’s willingness to make a number of allowances in Shine Forever’s favour in other aspects of the calculations. ….

21 The evidence before the Court does not enable me to determine, with precision, the actual profit which Shine Forever derived from its infringement of the applicant’s marks. It is to be borne in mind that the difficulties to which I have adverted have, in large measure, been created by the failure of Shine Forever to comply with the Court’s orders and its failure to appear and make submissions on the amount to be awarded as an account of profits. The applicant should not be prejudiced by these failures.

22 The applicant has proposed a plausible method of calculating sales revenue during the relevant period by assuming that the average monthly sales figure in the first eight months of the period continued for the next 16 and a half months. In the absence of audited figures for the latter period this approach is not unreasonable and may be regarded as the best available option. Once the sales revenue figure was established, Shine Forever bore the burden of persuading the Court, by evidence, what costs should properly be deducted in order to determine the profit which it made from selling clothing and accessories bearing the infringing marks. This, Shine Forever has manifestly failed to do. ….

His Honour then awarded Bugatti its costs on an indemnity basis because of Shine Forever’s dismal failure to comply with its obligations to the Court.